1. What a cost segregation study does
A building normally depreciates over 27.5 years (residential) or 39 years (commercial). A cost segregation study breaks the purchase price apart and reclassifies components like flooring, cabinetry, dedicated electrical, and land improvements into 5, 7, and 15-year property, so a large slice of the basis depreciates on much shorter schedules.
On the federal return, that reclassified property also qualifies for bonus depreciation, which restores a 100% first-year write-off for qualifying property acquired and placed in service after January 19, 2025. States set their own rules, which is where Maine comes in.
2. Maine and federal bonus depreciation
Maine has decoupled from IRC 168(k) bonus depreciation continuously since 2002 and did not change course after OBBBA. Maine Revenue Services' October 2025 Tax Alert states Maine 'continues to decouple from federal accelerated or bonus depreciation and instead requires depreciation to be claimed over the normal life of the asset.' Individuals add back the net increase in depreciation attributable to 168(k) under 36 M.R.S. 5122(1)(KK) (corporations under 5200-A(1)(CC)), then recover it in later years via a subtraction modification. The 2026 conformity bill (LD 2212) kept the 168(k) decoupling, added a parallel addback/subtraction for new IRC 168(n) qualified production property, and the identical rules apply to individual and corporate filers.
Year placed in service: add back 100% of the bonus deduction (net increase over regular MACRS). Later years: subtraction under 36 M.R.S. 5122(2)(RR) (corps: 5200-A(2)(FF)) equal to the depreciation that would have been allowable under IRC 167/168 without bonus, so the addback is recovered over the asset's regular MACRS life; total subtractions are capped at the addback, and any shortfall is recovered as a basis/gain adjustment when the property is sold. The former partial offset, the Maine Capital Investment Credit (36 M.R.S. 5219-NN, 1.2% of the addback for Maine-located property 2020-2024), expired for property placed in service on or after January 1, 2025.
Worked example
A $1,000,000 building, with and without a study
Illustrative only. A residential rental purchased for $1,000,000 of building basis (land excluded), acquired and placed in service after January 19, 2025.
Building basis
$1,000,000
Reclassified to 5, 7, and 15-year property (25%)
$250,000
Federal first-year deduction at 100% bonus
$250,000
Year 1 on that $250,000 without a study (27.5-year straight line)
about $9,100
On the Maine return, the $250,000 federal bonus deduction is not allowed. Year placed in service: add back 100% of the bonus deduction (net increase over regular MACRS). Later years: subtraction under 36 M.R.S. 5122(2)(RR) (corps: 5200-A(2)(FF)) equal to the depreciation that would have been allowable under IRC 167/168 without bonus, so the addback is recovered over the asset's regular MACRS life; total subtractions are capped at the addback, and any shortfall is recovered as a basis/gain adjustment when the property is sold. The former partial offset, the Maine Capital Investment Credit (36 M.R.S. 5219-NN, 1.2% of the addback for Maine-located property 2020-2024), expired for property placed in service on or after January 1, 2025.
Model your own numbers with the tax strategy projector.
3. Section 179 in Maine
Full conformity with IRC 179 for property placed in service in tax years after 2010; no addition modification required. Maine also conformed to OBBBA's expanded 179 limits ($2.5M expensing / $4M phase-out for property acquired after Dec 31, 2024) for 2025 returns per the Governor's conformity directive, confirmed by the December 31, 2025 conformity date enacted in LD 2212. Section 179 is the main first-year expensing lever that works identically on the Maine return.
4. Does it still help in Maine?
Yes. Maine starts from federal AGI and follows federal MACRS recovery periods and methods (5/7/15/27.5/39-year), decoupling only from the 168(k) bonus layer, so reclassifying components into 5-, 7-, and 15-year property still accelerates Maine depreciation on its own, and the bonus addback itself is recovered over those shorter reclassified lives rather than 27.5/39 years.
- •Maine has decoupled from 168(k) bonus every year since 2002, one of the longest-running decouplings in the country, and confirmed it again post-OBBBA in its October 2025 Tax Alert and the April 2026 conformity bill (LD 2212).
- •The Maine Capital Investment Credit (36 M.R.S. 5219-NN), which gave a 1.2% nonrefundable credit on the bonus addback for property placed in service in Maine 2020-2024 (in lieu of the recovery subtraction), expired for property placed in service on or after January 1, 2025.
- •The recovery subtraction (5122(2)(RR)) is lifetime-capped at the original addback, and on a taxable disposition Maine adjusts the federal gain/loss by any unrecovered addback, so the deduction is never permanently lost.
- •Full Section 179 conformity since 2011 with no state cap makes 179 the preferred first-year expensing route on Maine returns, including OBBBA's $2.5M/$4M limits.
- •LD 2212 (2026) also decouples Maine from new IRC 168(n) qualified production property depreciation (addback plus recovery subtraction) and phases a 174A R&E addback down from 100% (2025) to 10% (2029).
- •Maine used Public Law 2025, c. 336 to let the Governor direct 2025-season administration before the legislature acted, so 2025 forms were built on the Governor's conform/decouple directive; LD 2212 later ratified the IRC Dec 31, 2025 conformity date.
5. The exit: recapture and timing
The accelerated deductions come back into view when you sell. Gain attributable to the 5, 7, and 15-year property is Section 1245 recapture, taxed at ordinary rates, and the straight-line depreciation on the building itself is unrecaptured Section 1250 gain, taxed at up to 25%. A study does not create that bill, it moves deductions forward, but the timing of the sale decides how much of the benefit you keep.
Two levers manage the exit. A 1031 exchange defers both flavors of recapture along with the rest of the gain, and simply holding the property lets the time value of the early deductions do its work; most owners want a 3 to 5 year horizon before a taxable sale for the math to stay comfortably positive. Model the exit before you commission the study, not after.